3. No, the company should concentrate its remaining inventory of X7 chips
on making product A, not product B. The company should focus on the
product that will provide the greatest amount of contribution margin.
Under the conditions posed, product A will provide the greatest amount
of contribution margin since (1) it has a CM ratio of 72% as compared
to only 60% for product B; (2) the two products have the same selling
price, and therefore, due to its higher CM ratio, product A will generate
a greater amount of contribution margin per chip than product B; and
(3) the two products require the same number of chips per unit.
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